Davis & Kuelthau, S.C., 111 East Kilbourn Avenue, Suite 1400,
Milwaukee, WI 53202,
by Mr.MarkF.Vetter, Attorney at Law,
appearing on behalf of the City of
Kaukauna.

ARBITRATION AWARD

The City of Kaukauna (hereinafter referred to as the City) and Kaukauna City
Employees
Local 130, AFSCME, AFL-CIO (hereinafter referred to as the Union) jointly requested that
the
Wisconsin Employment Relations Commission designate Daniel Nielsen, an arbitrator on its
staff,
to hear and decide a dispute concerning the implementation of a self-funded insurance plan
for
City employees in August of 1990. A hearing was held on June 26, 1991 in Kaukauna,
Wisconsin, at which time the parties were afforded full opportunity to present such
testimony,
exhibits, other evidence and arguments as were relevant. A stenographic record and
transcript
were made of the proceedings, which were received by the arbitrator on July 14, 1991. The
parties submitted briefs and reply briefs, the last of which were exchanged through the
arbitrator
on October 2, 1991, whereupon the record was closed.

Now, having considered the evidence, the arguments of the parties, the pertinent
contract
language, and the record as a whole, the undersigned makes the following Award.

ISSUE

The parties were unable to stipulate to an issue and agreed that the undersigned
should
frame the issue in his Award. The Union proposes the issues as:

GENERAL ISSUE: "Has the City violated the Collective Bargaining Agreement by
replacing
the WPS-HMP health insurance plan with a self-funded plan administered
by American Medical Security (AMS)? If so, what is the appropriate
remedy?"

SUB ISSUE (1): "Whether or not the benefits provided under the self-funded plan
duplicate
the benefits provided by WPS-HMP?"

SUB ISSUE (2): "Whether the administration of those benefits by AMS duplicate
the
administration under WPS-HMP?"

The City proposes that the issue be stated as follows:

"Is the City making group health insurance available to all
full-time bargaining unit employees
pursuant to the requirement in Article XIII - INSURANCE, Section 1 in the Agreement? If
not,
what is the appropriate remedy?"

After consideration of both formulations, the undersigned believes that the issue may
be fairly
stated as follows:

Did the City violate the collective bargaining agreement when it
replaced the WPS-HMP
health insurance plan with a self-funded insurance plan administered by American Medical
Security? If so, what is the appropriate remedy?

RELEVANT CONTRACT LANGUAGE

ARTICLE IX

GRIEVANCE PROCEDURE

Section 1. The parties agree that the prompt and just
settlement of grievances is of
mutual interest and concern. Should a grievance arise, whether in reference to a question of
interpretation of the agreement or to a question relating to safety and/or other matters, the
grieving
employee shall first bring the complaint to the Steward or Grievance Committee of the
Union.
If it is determined after investigation by the Union that a grievance does exist it shall be
processed
in the manner described below:

***

***

ARTICLE XIII

INSURANCE

Section 1. Group health insurance will be available to all
fulltime employees with the
Employer paying ninety-five percent (95%) of the premium of the employee rate, single or
family.
The employee shall be required to pay the fifty dollar ($50.00) deductible. If an employee
retires
at age 62-65 and is not eligible for health insurance from any subsequent employer, the City
will
pay seventy-five (75%) of the premium for continuing under the group health insurance if the
employee desires coverage.

***

BACKGROUND FACTS

The City is a municipal corporation providing general governmental services to the
people
of Kaukauna, in east central Wisconsin. The Union is the exclusive bargaining
representative for
the employees of the City's Streets and Parks Departments.

For some years, the City and the Union have been parties to a collective bargaining
agreement setting forth the wages, hours, working conditions and fringe benefits for
employees.
This agreement includes, at Article XIII, §1, a pledge to provide group health
insurance:

"Group health insurance will be available to all fulltime
employees with the Employer paying
ninety-five percent (95%) of the premium of the employee rate, single or family...."

This language has been in the agreement, unchanged, since 1972. Prior to 1973, the
insurance was provided through Blue Cross. Blue Cross terminated the policy held by the
City
in 1973, and the parties negotiated a change to Wisconsin Physicians' Service (WPS). An
HMP
endorsement to the plan was later negotiated.

In 1984, the City proposed to change insurance carriers, and the Union objected to
any
change. Bruce Patterson, the City's labor representative, sent Union Staff Representative
James
W. Miller a letter, dated February 1, 1984, setting forth the City's position:

***

The City of Kaukauna is currently reviewing the question of
health insurance providers which
is within its contractual and statutory rights. The City believes a change in the health
insurance
provider is not a violation of the labor agreement with Local 130. The City recognizes the
Union's right to bargain on insurance benefit levels and also recognizes its contractual
commitment as to the present benefit levels.

Ultimately the City decided to self-fund the existing HMP benefits, rather than switch
carriers. The change was instituted on or about April 1, 1984, over the objections of the
Union.
Among other things, the Union was concerned over the self-funded plan's failure to
automatically
incorporate state mandated benefits, the details of plan administration and the lack of
regulation
of self-funded plans by the Office of the Commissioner of Insurance. On March 11, 1985 a
prohibited practice complaint was filed with the Wisconsin Employment Relations
Commission,
alleging that the City had self-insured and had thereby interfered with protected rights,
discriminated against employees, refused to bargain, and violated the existing collective
bargaining
agreement. No meetings or hearings were conducted on the complaint, and it was held in
abeyance. In 1987, the City returned to the WPS insurance plan, and the complaint was
withdrawn.

In 1989, the City again addressed insurance, this time in negotiations over the
1989-90
labor agreement. The City proposed to switch from WPS-HMP to WPS Care Share, which
would
have featured a deductible provision, as well as several changes in coverage. As part of its
proposal, the City offered to pay the deductible for employees. The parties reached impasse,
and
the City included the CareShare as part of its final offer. In discussing the insurance issue,
Arbitrator Robert Reynolds commented that:

A review of the present contract (Article XIII, Section 1) reveals
no language relating to a
specific health insurance contract or to the level of benefits to be provided under that
contract.
Here the City is making group health insurance available to its full-time employees, and the
Careshare plan is surely a group health insurance plan. The only alteration in contract
language
relates to payment of the deductible, a change that would, on its face, benefit Union
members.
Were the group health plan suggested by the Employer specifically set forth in the cited
Article,
the rigorous standard would be appropriate to apply. In this case, that standard will not be
invoked.

That does not estop the arbitrator from considering the proposed
final offer language. It
merely allows application of a less ridged (sic) standard.

After discussing both parties' offers, Arbitrator Reynolds selected the Union's final
offer,
including status quo on the insurance in his Award dated February 9, 1990:

The City of Kaukauna has made a well-reasoned and responsible
final offer. It has not
attempted to solve the very real problem of health care costs at the expense of its employees.

On the other hand, the Union is correct in its ascertion (sic) that
continuation of HMP would
be largely paid for by adoption of it (sic) lower wage request. The benefit level is so
attractive
to the employees that they would prefer to give up a substantial wage increase under this
contract
and the step up in wages to be in force at the beginning of bargaining for its next contract to
retain
those benefits.

In light of the substantial reduction in benefits under the City's
offer, the final offer of the
Union is found to be more reasonable and will be adopted here.

In 1989, the City's cost for the HMP plan increased by 38%.
Effective June 1, 1990, the
rates increased by an additional 25%. These increases motivated the City to explore
alternatives
to the HMP plan. On May 25, 1990, Patterson wrote to Miller:

Dear Mr. Miller:

This letter is written to advise you that the City of Kaukauna is
considering changing the
method of administering its health insurance program on or about July 1, 1990. The benefit
levels
will remain as they are under the present program offered by WPS.

If you desire to discuss this matter with City representatives,
please contact me to arrange an
appointment within the next ten days.

Thank you for your attention in this matter.

Sincerely,

/s/ Bruce K. Patterson

Bruce K. Patterson

Miller responded by letter dated June 4, 1990:

Dear Mr. Patterson:

I am in receipt of your letter dated May 25 concerning the health
insurance for the City of
Kaukauna and I believe in a previous conversation that I had indicated to you what the
position
of the Union is on this matter. If not, here it is.

The Union believes that the arbitration award or the labor
agreement for the year 1989-90 has
settled the insurance issue for the term of this agreement. The Union further believes that
the
decision as to who is going to administer the program is bargainable and that the Union does
not
wish to reopen the labor agreement at this time. The Union would be most happy to sit
down with
you and city representatives to discuss this issue; however, I must first inform you that that
(sic)
Union does not agree that this would be a bargaining session nor does our meeting with city
officials to discuss this issue in any way constitute a reopening of the labor agreement for
negotiations of any kind. Please advise.

I am sorry I did not get to respond to your letter sooner but I
have been away on vacation.

Sincerely,

James W. Miller

Staff Representative

Patterson and Miller met to discuss the City's self-funding plan, but the parties
reached
no agreement. On August 1, 1990, the City terminated the WPS-HMP plan and instituted a
self-funded plan administered by American Medical Security (AMS), a third party
administrator with
claims processing offices in Green Bay. The Union filed a prohibited practice charge with
WERC, but the parties agreed to withdrawal of the charge in favor of arbitration before the
undersigned. Additional facts, as necessary, will be set forth below.

POSITIONS OF THE PARTIES

The Union's Brief

The Union takes the position that the City violated the collective bargaining
agreement
in
switching to a self-funded plan. The parties have given meaning to the ambiguous term
"group
health insurance" through their negotiations. Historically, the insurance has not been
changed
except through negotiations, and thus the parties have agreed that their mutual intent governs
the
exact contours of "group health insurance" under the contract. Here the City has
unilaterally
changed the insurance, in violation of that agreement.

The parties have a long history of maintaining the negotiated levels of insurance
coverage.
When the City initially attempted self-funding, the WPS-HMP program was restored after a
protest by the Union. Subsequently, the City unsuccessfully attempted to change insurances
in
an interest arbitration proceeding. Neither the abandonment of the initial attempt to
self-fund,
nor the recourse to the expense and risk of interest arbitration over this issue, are consistent
with
the City's current theory that offering any group health insurance, no matter what the
specifics,
satisfies the mandate of Article XIII.

Even if the City had the right to change carriers, the benefits under the self-funded
system
do not duplicate the previously existing coverage. The absence of state regulation of
self-funded
plans is, in and of itself, a critical shortcoming of the new insurance. State regulated
insurance
companies are subject to presumptions of coverage which do not apply to self-funded plans.
Thus
in the event of a dispute, the employee has important protections under standard insurance
plans,
including an appeals process sympathetic to the insured. The Office of the Commissioner of
Insurance strictly regulates carriers under a system which is designed to favor the insured.
This
consumer protection system is an important benefit to employees. The self-insurance plan,
including its reinsurance component, is not subject to OCI regulation, and therefore cannot
ever
duplicate the previous benefit levels. Any dispute under the self-insurance scheme may be
submitted to the contract's grievance procedure, but the burden of proof is on the employee
and
the employee is forced to proceed before an arbitrator who has far less expertise than the
Office
of the Commissioner of Insurance and who has a far more limited range of remedies
available.
Plainly this is an inadequate substitute for OCI regulation.

Aside from the implications of unregulated self-funding, the City's new plan fails to
meet the
contractual level of benefits in that its administration is different from and inferior to the plan
administration under WPS. The self-funded plan has resulted in billing disputes with threats
of
collection actions against employees, and refusals by the City's plan to pay sums from which
workers would have been held harmless under the WPS-HMP plan. Pharmacies which
readily
accepted the WPS drug card have refused to accept the AMS drug card. No guarantee of
confidentiality is extended by AMS. Whereas WPS utilized methods of provider payment
which
did not involve making the provider wait for payment, AMS often requires additional
information
from the employee before paying claims. This not only raises the possibility of dunning
notices
to employes during the payment processing period, it adds a substantial inconvenience for
employees which was not experienced under WPS. The WERC has ruled, in the
Madison
Metropolitan School District declaratory ruling (Dec. No. 22129/22130) that
employees have
"substantial interests in the integrity, reliability and responsiveness of the
carrier/administrator that
is selected to be responsible for fair, accurate and prompt payment of employee health
insurance
claims." The Union submits that the Commission's observation buttresses its position that
plan
administration is an important benefit, and one which has not been maintained in this case.

For all of the foregoing reasons, the Union asks that the grievance be sustained.

The City's Brief

The City takes the position that there has been no violation of Article XIII and that
the
grievance should be denied. This grievance involves an interpretation of the collective
bargaining
agreement, and the arbitrator has no authority to add terms to the contract or impose
obligations
upon the City which it has not agreed to in the body of the contract. The disputed provision
is
Article XIII, §1 which provides, in pertinent part:

"Group health insurance will be available to all fulltime
employees with the Employer paying
ninety-five percent (95%) of the premium of the employee rate, single or family..."

This language does not require that insurance be provided by any specific carrier, nor
that
any specific level of benefits be maintained, nor that the insurance be provided through a
traditional carrier rather than through self-funding, nor that any particular manner of
administration be followed. The contract itself only requires that group insurance be made
available.

There is no serious dispute over the continuing availability of group health insurance
benefits to these bargaining unit employees. The City presented expert testimony to the
effect
that its self-insurance plan was group health insurance, as that term is commonly understood
in
the industry. The statutory definition of "group insurance" in §105 of the IRS Code
is met by
the self-funded plan, which would be subject to IRS regulation. Wisconsin Statutes, at
§120.13(2), recognize that self-funded plans are group insurance, as has WERC
Examiner
Amedeo Greco in his Mayville School District decision (Dec. No. 25144-C
(Greco, 6/90).
Mayville is, the City asserts, the seminal Wisconsin case on whether self-funded
plans are
"insurance". The examiner squarely addressed the issue and, rejecting many of the same
arguments which are raised here, held that there was no meaningful distinction between
traditional
"insurance" policies and "self-funded systems" and that the two were interchangeable terms
in
labor relations.

Inasmuch as the City only obligation is to provide group health insurance, and since
the
evidence clearly establishes that such insurance continues to be available, the City asks that
the
grievance be denied.

The Union's Reply Brief

The City completely ignores the bargaining history underlying the commitment to
provide
"group health insurance", and the meaning given that term by the parties in negotiating and
administering the contract over the years. The City has, in the past, acknowledged that it
did not
have the right to unilaterally adopt a self-funding system, first when it backed away from an
attempt to self-fund in the face of a prohibited practice charge, and second when it took the
insurance issue to interest arbitration and lost.

The City's reliance on Mayville is completely misplaced.
Mayville involved a school
district whose attempt to self-fund was consistent with the interpretation given to the term
"insurance" by both parties -- that it, that it included a self-funding option. This critical
factual
element is missing in this case and Mayville cannot control the outcome here.

Noting the City's attempt to cite its expert witness for the proposition that
"self-funding"
is equal to "insurance", the Union asserts that the City's actuary has no qualification to make
such
a legal opinion. On the other hand, the Union's expert witness is a former official of the
OCI and
a noted insurance attorney. Her opinion that self-funding is not insurance because it does
not
transfer risk to a third party is far more persuasive.

The history of this relationship is what is relevant here, and the outcome should be
controlled by the meaning given the term "insurance" by these parties. As the record
demonstrates that self-funding was never intended to be within the scope of that term, the
grievance should be sustained, the employees made whole for any losses, and the WPS-HMP
plan
should be restored.

The City's Reply Brief

The Union's claim that bargaining history and/or past practice are relevant to this
dispute
assumes that the contract language is ambiguous. This assumption has no support in the
record.
The common and ordinary usage of the words in Article XIII, §1 leaves no doubt as to
the
provision's meaning -- it merely requires the City to make group health insurance available
to
employees. As discussed in the initial brief, this has been done, and there need be no
reference
to other indicators of the contract's meaning.

Assuming, arguendo, that there is some ambiguity in the language, the
evidence of
bargaining history and past practice in the record falls short of demonstrating some mutual
agreement on the contract's meaning. For example, the City's prior introduction of
self-funding
in 1984, together with a contemporaneous pledge to maintain benefit levels, demonstrates
that the
City never considered OCI regulation or a traditional insurance format to be benefits under
the
contract. The subsequent decision to return to WPS-HMP was made unilaterally and, far
from
acknowledging any merit in the Union's prohibited practice complaint, reflected the fact that
WPS
dropped its rates below those offered by Fireman's Fund. Thus the decision was purely
economic.

As to the Union's claim that some mutual intent is demonstrated by the City's
proposal in
interest arbitration over the 1989-90 contract to introduce the WPS CareShare insurance plan,
the
City asserts that the 1989-90 proposal is factually distinct from the self-funding plan at issue
here.
Care Share would simply have introduced deductibles to be paid by the City, with some
minor
benefit changes. By placing the proposal on the table for negotiations, the City
acknowledged
only that it has a duty bargain over annual deductibles. That duty says nothing about the
City's
right to go with a self-funded insurance plan.

Even if one assumes for the sake of argument that the OCI regulation discussed by
the
Union is a "benefit" under the insurance plan, the City has no obligation to maintain any
specific
level of benefits. This completely distinguishes the City of Richland Center
case relied upon by
the Union, where the contract clearly committed the City to make "no reduction in benefits"
when
changing insurance carriers. Absent such language in this case, Richland
Center ,with its
discussion of the "benefits" of OCI regulation, is irrelevant. The City notes, however, that
it
established through the testimony of its expert witness that the stop loss insurance for claims
in
excess of $15,000 per individual or 25% of aggregate expected claims is purchased through a
traditional insurer and is subject to OCI regulation. Thus claims in excess of the stop-loss
are
regulated by OCI. In any event, there is no evidence of any loss to any employee as a
result of
the loss of OCI regulation over a portion of the insurance, and the Union's argument is
therefore
purely speculative.

While the Union pointed to some problems with the implementation of the self-funded
plan, the City points in turn to the Mayville decision, wherein the examiner
found that the statusquo doctrine of labor law could accommodate such difficulties as "inevitable"
and "only natural"
when a change in insurers took place. The occurrence of such problems as payment delays
and
disputes over covered charges during the implementation period should not be translated into
a
loss of benefits. In each specific case cited by the Union, the City has either resolved the
dispute
in favor of the employee or was still pursuing the matters at the time of the hearing. The
record
shows that benefit levels have been maintained, and the Union's argument in this regard must
fail.

Responding to the Union's arguments concerning the administration of the insurance
plan,
the City reiterates its position that the contract makes no mention of guaranteeing any method
or
level of administration. However, the record evidence of administrative problems is limited
to
five employees/families. Given the large amount expended on paying insurance claims in
the ten
months under the plan and the number of employees in the City, one can only conclude that
the
plan is well administered and that the problems cited by the Union are deminimis.

The Union is attempting to gain through arbitration guarantees that it never secured
in
bargaining. The arbitrator is without authority to permit such a result and the grievance
should
be denied.

DISCUSSION

The dispute in this case centers on the City's unilateral decision to abandon the
traditional
WPS-HMP health insurance plan and to instead self-insure, with AMS as the third party
administrator. The collective bargaining agreement addresses health insurance at Article
XIII:

Section 1. Group health insurance will be available to all
fulltime employees with the
Employer paying ninety-five percent (95%) of the premium of the employee rate, single or
family.
The employee shall be required to pay the fifty dollar ($50.00) deductible. If an employee
retires
at age 62-65 and is not eligible for health insurance from any subsequent employer, the City
will
pay seventy-five (75%) of the premium for continuing under the group health insurance if the
employee desires coverage.

The first reference point in determining the meaning of a contract clause is the
language
used by the parties. If the parties have used language which is clear and unambiguous, so
that
it is not susceptible to more than one reasonable interpretation, no further inquiry need be
made.
Inferential evidence of intent, such as custom or negotiating history, cannot displace clear
language. If, however, the contract language does not on its face settle the question, the
arbitrator is obligated to apply recognized principles of interpretation in order to determine
the
correct meaning.

Clear Language

The City asserts that the language of Article XIII defines its obligations in clear and
unambiguous terms, and limits those obligations to providing insurance and paying a portion
of
the premium. This argument sidesteps the central issue, which is what the parties meant by
the
term "group health insurance". The bottom line for the City's argument is that any bundle
of
benefits, coverages, administrative practices and government regulation is acceptable under
the
contract so long as it may fairly be termed "insurance". The Union argues that the intent of
the
term is far more precise, and must be read to mean the HMP plan offered by Wisconsin
Physicians Service or, at the very least, the very same policy administered in exactly the
same
way, through a traditional insurance carrier.

The City is correct insofar as it argues that the contract is silent on the identity of the
carrier/administrator and the precise contours of the health insurance benefits. Silence on
these
points, however, cannot be equated with clarity. Common experience does not support the
notion
that parties negotiate group health insurance -- generally the second most important and
expensive
element of the compensation package -- without having at least some basic understanding of
what
they are receiving for their money. Thus the undersigned rejects the City's contention that
the
contract clearly grants it a virtual carte blanche to unilaterally determine the content of the
health
insurance plan for represented employees.

The Union claims that the use of the term "group health insurance" cannot encompass
self-insurance, since the latter does not have the characteristics of insurance in the state of
Wisconsin,
principally regulation by the Office of the Commissioner of Insurance and the automatic
inclusion
of state mandated benefits. While the undersigned agrees that there is a significant
substantive
difference in the administrative features of a policy purchased from a regulated carrier and a
self-funded benefit plan, the initial question is not whether such differences exist. Instead,
the
question is whether the language of this contract clearly evinces an intent to preclude
self-funding.
Among other possible definitions, the term "insurance" may refer to protection against loss,
or
the contract which guarantees such protection. (1)

The former would clearly include the City's
self-funded plan, since it promises payment of health care costs to the same extent as the
WPS-HMP plan. The latter is also susceptible to an interpretation embracing a self-funded
plan, if one
views the contract as being between the City and the employees. For these reasons, the
undersigned concludes that the contract language standing alone does not unequivocally
support
the Union's position.

Whether the mutual understanding expressed by the term "group health insurance"
extends
only to some generalized consensus on levels of coverage or also includes agreement on
specific
benefits and administrative characteristics is a question that turns on the practices,
negotiations and
other evidence of intent available in this record. (2)

The wording of the contract does not foreclose either party's interpretation. Neither
the
almost limitless flexibility suggested by the City nor the complete rigidity urged by the Union
would be self-evident simply from a reading of the contract language. These are two
extremes
on the same continuum, and the correctness of either one cannot be determined without
reference
to evidence of intent beyond the written words of Article XIII.

Bargaining History

Consideration of bargaining history leads to the conclusion that the City did not retain
the
wide discretion it claims over the content of the insurance program. The contract is silent as
to
the specific level of health insurance benefits. The WPS insurance plan was negotiated by
the
City and the Union in 1973 when Blue Cross cancelled its coverage of City employees, and
the
HMP endorsement was added in subsequent negotiations. At no point in bargaining did the
parties expressly discuss the issues of whether self-insurance was the equivalent of traditional
insurance and whether or how carriers could be changed in mid-contract term. What the
parties
did expressly discuss, and reach agreement on, was that the insurance for employees would
be the
WPS-HMP plan.

In the undersigned's view, the interest arbitration over the health insurance issue in
1989-90 contract negotiations confirms that the WPS-HMP plan represents the mutually
recognized
statusquo on insurance benefits. Contrary to the City's argument
that it proceeded to arbitration
merely on the question of deductible increases, the record reflects that its final offer would
have
both changed the deductible and modified coverages. The Union devoted a good deal of
attention
to these benefit changes in its brief before the interest arbitrator. Notwithstanding Arbitrator
Reynolds' dicta about the lack of a contractual guarantee of any specific benefit levels, his
Award
was expressly premised upon the "substantial reduction in benefits" worked by the City's
proposed
shift to the WPS CareShare plan:

"In light of the substantial reduction in benefits under the City's
offer, the final offer of the
Union is found to be the more reasonable and will be adopted here." (3)

Rather clearly the interest arbitrator made a choice between two alternatives on
insurance --
the City's proposal to switch to WPS CareShare and the Union's desire to retain WPS-HMP
--
and concluded that the Union's statusquo position was the more
reasonable. The City's assertion
in this proceeding that it may unilaterally change insurance benefit levels is completely
inconsistent with the outcome of the 1989-90 negotiations.

The bargaining history persuades the undersigned that the term "group health
insurance"
as used in this contract means the benefits provided by the WPS-HMP policy. The question,
however, remains as to whether the obligation to maintain benefit levels includes the
obligation
to insure through a carrier.

Past Practice

The best evidence of how ambiguous language is to be interpreted is the manner in
which
the parties themselves have interpreted it in the past. In this case, the term "group health
insurance" has in practice meant WPS insurance since 1973, with the exception of a two to
three
year period beginning in 1984, when the City unilaterally introduced self-insurance
administered
by Fireman's Fund. The Union objected to this change, and filed a complaint of prohibited
practices against the City. The charge was neither actively pursued nor withdrawn, until the
City
offered to reinstate WPS.

Neither the Union's failure to prosecute the prohibited practice nor the City's
decision
to
restore the statusquoante has particular probative
value. The Union's complaint rather clearly
establishes its belief that self-insurance, even with the promise of maintaining benefit levels,
is
inconsistent with the negotiated language. No reason was established for its inaction after
the
filing of the complaint, and no reliable inference may be drawn from the lack of prosecution.
For the City's part, the reintroduction of WPS was allegedly prompted by the fact that the
rates
for HMP had become more attractive than the cost of self-insurance. Even though the
mayor
characterized the offer to return to WPS as an effort to "respond to the concerns" and
"satisfy"
the prohibited practice complaint, (4)his letter
can only fairly be read as an offer of settlement.
It is a well accepted principle that an offer of settlement does not constitute an admission.
The
withdrawal of the complaint and the return to WPS were accomplished without any written
settlement agreement, and neither party can be said to have prejudiced its position regarding
the
permissibility of a switch to self-insurance by its handling of the previous incident.

Although no reliable inference may be drawn from the previous switch to self-funding
and
subsequent return to WPS, the undersigned is of the opinion that the long history of
contracting
for insurance through WPS cuts in favor of the Union's position in this case. It is widely
recognized that a long established practice may be binding upon the parties for the term of
the
agreement, even in cases where the contract is utterly silent on the condition of employment
which
is the subject of the practice. This principle is premised upon the fact that parties do not
bargain
in a vacuum, and are presumed to have negotiated their agreement in full recognition of
existing
benefits and working conditions. For that reason, the principle of enforceability has much
greater
force in the area of benefits than in areas more commonly identified with the prerogatives of
management, and where the practice arises from a mutual agreement than a unilateral
decision.
Although expressed in a variety of ways, it also appears that most arbitrators who have
addressed
this issue recognize a practical distinction between "major" benefits, which the parties might
be
presumed to have weighed in bargaining, and "minor" benefits. (5)

In this case, the decision to insure through WPS was arrived at mutually in 1973.
Every
bargain since that time has been concluded with WPS as the carrier, although as previously
discussed neither party expressly raised the identity or the nature of the carrier as an issue in
bargaining. Thus the practice of providing an agreed upon level of benefits through a
traditional
carrier arises from a mutual agreement of the parties.

The City has acknowledged, both in correspondence in 1984 and 1990 and in the
testimony
of its labor relations consultant at the hearing in this case, that it has an obligation to
maintain the
level of benefits that existed under WPS-HMP. This is consistent with the obligation to
continue
well established practices regarding benefits as discussed above. It is also consistent with the
Reynolds' Award. The question is whether the the distinction between the carrier provided
insurance plan and the self-insurance plan may be said to implicate employee "benefits" in
this
case. I conclude that it does, in that the regulation of insurance carriers by the State carries
with
it automatic extension of state mandated benefits and the application of a presumption of
coverage
in the event of disputes, features which are lacking in the City's current self-insurance plan.
These are substantial benefits to employees. In the undersigned's view, they would
constitute the
type of "major" benefits that would reasonably be expected to carry over through the contract
term. The extension of state mandates, although by its nature a speculative benefit, is
nonetheless
a valuable promise to employees that benefits may be maintained at the minimum standards
set
by the state without the necessity of reopening the contract or relying on the good intentions
of
the employer. The value to employees and the Union of being able to receive additional
insurance
benefits without bargaining is self evident. Likewise the availability of a forum for resolving
disputes which applies a presumption of coverage is decidedly more desirable from the
employee's
point of view than a contractual grievance procedure in which the Union bears the burden of
proof. The broader range of remedies available under OCI regulations than is typically
found
in grievance arbitration is another beneficial aspect of coverage through a regulated carrier
which
is missing from the City's self-funded plan.

With respect to the other areas in which the Union believes the self-funded plan is
deficient, the undersigned concludes that these do not represent reductions in benefits which
the
parties might reasonably have expected to maintain during the term of the contract. While
there
were several bills identified as being the subject of disputes, in each instance the City
persuasively
demonstrated that it was making good faith efforts to resolve the disputes and pay the claims
to
the same extent that WPS would have paid them, including directives to its third party
administrator to pay for procedures on an out-of-contract basis and to not apply a UCR
reduction
to bills. In addition, the City has directed its administrator to duplicate WPS-HMP benefits
even
where they are not mirrored in the AMS plan document and to make provision for
maintaining
patient confidentiality. The City makes a credible argument that the number of disputes is
very
small in relationship to the overall usage of the insurance, and that the administrative
problems
cited by the Union are transitional in nature.

CONCLUSION

The contract is ambiguous with respect to the level of benefits afforded by its
guarantee
of "group health insurance" and the permissibility of self-insurance. Bargaining history, and
in
particular the outcome of the 1989-90 interest arbitration, demonstrates that the WPS-HMP
plan
constitutes the agreed upon level of benefits for unit employees. The City has attempted to
maintain the coverage levels through its third party administrator. However, the lack of any
pledge to incorporate state mandated benefits, the absence of a presumption of coverage in
the
event of a dispute and the narrower range of remedies available before a grievance arbitrator
than
could be had from the Office of the Commissioner of Insurance represent a reduction in the
historical benefits employees have enjoyed for nearly twenty years. Thus the undersigned
concludes that the City violated the collective bargaining agreement when it replaced the
WPS-HMP health insurance plan with a self-funded insurance plan administered by American
Medical
Security.

The record does not reflect any actual monetary loss to any employee. In the event
that
such a loss has occurred, the appropriate remedy is to make the employee whole, by paying
the
difference between the benefits paid by AMS and/or the City, and the amount that would
have
been paid by WPS. With respect to the nature of the insurer, the violation flows from lack
of
protections under self-insurance that are available through state regulated insurers. The
undersigned remands the issue to the parties for a period of thirty days to attempt to reach
agreement on an insurance structure incorporating such protections. Absent agreement, the
appropriate remedy is to reinstate the WPS-HMP policy.

On the basis of the foregoing, and the record as a whole, the undersigned makes the
following

AWARD

The City violated the collective bargaining agreement when it replaced the
WPS-HMP
health insurance plan with a self-funded insurance plan administered by American Medical
Security. The appropriate remedy is to make employees whole for any losses which they
may
have suffered by virtue of payment of insurance benefits by AMS and/or the City at a level
less
than would have been paid under the WPS-HMP policy. The remedy question is remanded
to
the parties for a period of thirty days to allow for mutual agreement on an appropriate
vehicle for
providing insurance benefits in the future. Absent agreement on some other terms, the
appropriate remedy will be the reinstatement of the WPS-HMP policy effective June 5, 1992.
The
undersigned will retain jurisdiction over the remedy question until June 19, 1992.

Signed this 5th day of May, 1992 at Racine, Wisconsin:

Daniel Nielsen /s/

Daniel Nielsen, Arbitrator

1/ The term "insurance" has been defined as: "A
contract whereby, for a stipulated
consideration, one party undertakes to compensate the other for loss on a specified
subject by specific perils. ... A contract whereby one undertakes to indemnify another
against loss, damage, or liability arising from an unknown or contingent event and is
applicable only to some contingency or act to occur in the future. An agreement by
which one party for a consideration promises to pay money or its equivalent or to do an
valuable to another party upon destruction, loss or injury of something in which the
other party has an interest." Black's Law Dictionary, 5th Ed.; " 1. an
insuring or
being insured. 2. a contract (insurance policy) purchased to provide compensation for
a specified loss by fire, death, etc. 3. the amount for which something is insured. 4.
the business of insuring against loss...." Webster's New World Dictionary; "A
means
of providing or purchasing protection against some of the economic consequences of
loss." Employee Benefit Plans: A Glossary of Terms, 6th Ed. (International
Foundation of Employee Benefit Plans).

2/ In concluding that the contract language is
ambiguous,
the undersigned has carefully
considered whether the decisions of Examienr Greco in Mayville and Arbitrator
Houlihan in Richland Center provide guidance as to a commonly understood
meaning
for the term "group health insurance." Examienr Greco dealt with the question of
whether a switch to self-insuring benefit levels was consistent with the duty to maintain
the statusquoante under Section 111.70. The issue in
this case is not whether the
parties have a duty to bargain over the identity of the insurance provider, but whetehr
theyhave bargained over that topic and reached agreement. In other words, while
Mayville dealt with the statutory obligations of the employer, the arbitrator in
this case
must determine the contractual duties of the employer. In Richland Center,
Arbitrator
Houlihan interpreted language which expressly allowed for a change in carriers, so long
as there was no reduction in benefits. He was unable to determine whether the parties
intended the third party administrator of a self-insurance plan to equate with a "carrier"
and expressed no opinion on the question. He did determine that the self-insurance
plan, in part by virtue of its unregulated nature, yielded a reduction in benefits for the
employees. The contract language in Richland Center was substantially different
from
the contract language in this case, and the Award is not particularly helpful in
establishing a clear meaning for the term "group health insurance".